Fiscal Rules for Economies with Nonrenewable Resources: Norway and Venezuela

Bjerkholt, Olav; Niculescu, Irene Layrisse de

doi:10.1057/9781137001573_11

Cited by 37 publications

(47 citation statements)

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“…Another approach in the literature on managing natural resource revenue is the "bird-in-hand" hypothesis (Bjerkholt, 2002;Barnett and Ossowski, 2003). This strategy suggests that all windfall revenue is put in the SWF of which incremental consumption is restricted to the interest earned on the fund.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Natural Resource Revenues and Public Investment in Resource‐rich Economies in Sub‐Saharan Africa

Karimu

Adu

Marbuah

et al. 2017

Review Development Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Typescript prepared by Ayesha Chari. Terms of use: Documents inThe United Nations University World Institute for Development Economics Research provides economic analysis and policy advice with the aim of promoting sustainable and equitable development. The Institute began operations in 1985 in Helsinki, Finland, as the first research and training centre of the United Nations University. Today it is a unique blend of think tank, research institute, and UN agency-providing a range of services from policy advice to governments as well as freely available original research.The Institute is funded through income from an endowment fund with additional contributions to its work programme from Denmark, Finland, Sweden, and the United Kingdom. Katajanokanlaituri 6 B, 00160 Helsinki, FinlandThe views expressed in this paper are those of the author(s), and do not necessarily reflect the views of the Institute or the United Nations University, nor the programme/project donors. Abstract:The general policy prescription for resource-rich countries is that, for sustainable consumption, a greater percentage of the windfall from resource rents should be channelled into accumulating foreign assets such as a sovereign public fund as done in Norway and other developed but resource-rich countries. This might not be a correct policy prescription for resource-rich sub-Saharan African (SSA) countries, where public capital is very low to support the needed economic growth. In such countries, rents from resources serve as opportunity to scale-up the needed public capital. Using panel data for the period 1990-2013, we find in line with the scaling-up hypothesis that resource rents significantly increase public investment in SSA and that this tends to depend on the quality of political institutions. We also find evidence of a positive effect of public investment on economic growth, which also depends on the level of resource rents. Using some of the components of public investment, such as health and education expenditure, we find a negative effect of resource rents, suggesting among other things that public spending of resource rents is directed more to other infrastructure investments.

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Section: Theoretical Backgroundmentioning

confidence: 99%

Natural Resource Revenues and Public Investment in Resource‐rich Economies in Sub‐Saharan Africa

Karimu

Adu

Marbuah

et al. 2017

Review Development Economics

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“…A more conservative strategy is that countries place resource revenues in a fund-possibly abroad-and only consume the interest on the fund (Bjerkholt, 2002;Barnett and Ossowski, 2003). This rule yields constant consumption once revenue flows have ceased, but leads to a slow build up of consumption.…”

Section: Pragmatic Conservative Rule: Bird-in-hand Consumptionmentioning

confidence: 99%

Managing Resource Revenues in Developing Economies

Collier¹,

Ploeg²,

Spence³

et al. 2009

IMF Staff Pap

203

144

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This paper addresses the efficient management of natural resource revenues in capital-scarce developing economies. It departs from usual prescriptions based on the permanent income hypothesis and argues that capital-scarce countries should prioritize domestic investment. Because revenue streams are highly volatile, governments should protect consumption from shocks by increasing it only cautiously. Volatility in domestic investment can be moderated by a buffer of international liquidity, but it is also important to structure investment processes to be able to cope efficiently with substantial fluctuations. To date, most of the resource-rich countries of Africa have not had investment rates commensurate with their rate of resource extraction.

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“…Following from this, countries have been advised to invest resource revenues in foreign assets through a Sovereign Wealth Fund (SWF), only consuming the permanent interest accruing on resource wealth. An even more conservative version of this that has been recommended is the 'bird in hand' rule (Bjerkholt 2002), according to which resource revenues should be placed in a SWF and countries should only consume interest earned on the SWF (i.e. not consume imputed interest on the value of the resource still in the ground).…”

Section: Discussionmentioning

confidence: 99%